Inside Secure Investor presentation. January 2019

Transcription

1 Inside Secure Investor presentation January

2 Disclaimer This presentation and the information it contains are not, and will not constitute or form part of an offer of securities or a solicitation for the purchase, subscription or sale of securities of Inside Secure in the United States of America or any other jurisdiction where restrictions may apply. Securities of Inside Secure may not, directly or indirectly, be offered, sold, pledged or otherwise transferred within the United States of America absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act ), it being specified that the securities of Inside Secure have not been and will not be registered under the U.S. Securities Act and that Inside Secure does not intend to register its securities or conduct a public offering of its securities in the United States of America.. Any public offering of Inside Secure securities would be made by means of a prospectus previously approved by the AMF that contains detailed information about Inside Secure. This information is not intended for, and shall not be distributed, directly or indirectly, to persons who are residents of or located in the United States of America, Canada, Japan or Australia. The disclosure, distribution and publication of this presentation may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about and comply with any such restrictions. Inside Secure takes no responsibility for any violation of any restrictions by any person. This presentation includes statements that are, or may be deemed to be, forward-looking statements and may include projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance, including with respect to the anticipated future performance of Inside Secure and/or the combined group of Inside Secure and Verimatrix following completion of Inside Secure s acquisition of Verimatrix, if completed (the Transaction ). These forward-looking statements are generally identified by the use of forward-looking terminology, including terms such as believe, estimate, anticipate, expect, intend, may, will or should, and similar expressions, and include statements that Inside Secure makes concerning the intended results of its strategy and of the completion of the Transaction. Although Inside Secure s management believes that the expectations reflected in such forward-looking statements are reasonable, Inside Secure cannot assure investors that these expectations will prove to be correct. Investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Inside Secure, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include, among other things, risks related to Inside Secure s ability to complete the acquisition on the proposed terms or on the proposed timeline, the inability of Inside Secure to achieve expected synergies or to successfully integrate Verimatrix, uncertainties inherent to any business combination transaction and to the economic, financial, competitive and regulatory environment. No statement in this presentation is intended as a profit forecast or estimate for any period. Persons receiving this document may not and should not rely on forward-looking statements. Past performance is not an indicator of future results and the results of Inside Secure in this document may not be indicative of, and are not an estimate or forecast of, the future results of Inside Secure, and/or the combined group of Inside Secure and Verimatrix following completion of the Transaction. The forward-looking statements speak only as of the date hereof and, other than as required by applicable law, Inside Secure does not undertake any obligation to update or revise any forward-looking information or statements. For a more detailed description of the risks and uncertainties with respect to Inside Secure, please refer to the "Risk factors" section of the 2017 registration document filed with the AMF on April 10, 2018 under number D , available on 2

3 Inside Secure: the Leading at the Core Security Provider to Unleash Business of Entertainment and IoT $38.8 million of revenue and $8.8 million of EBITDA* in 2017 A unique and strategic position at the heart of connected devices and mobile apps From software security to increased embedded hardware security Entertainment OTT Internet of Things & Connected Cars Financial Institutions Data Center Technologies, software, tools and services to protect customers transactions, content, applications, and communications More than 25 years expertise and know how in security More than 2 billion digital products protected Inside Secure Expertise Content Protection Silicon IP & Secure Protocols Code Protection (*) EBITDA definition in Appendix hereof 3

4 Inside Secure: Enabling Global Leading Companies to manage new Security Challenges Entertainment OTT Internet of Things & Connected Cars Financial Institutions Data Center 4

5 Inside Secure: Securing Premium Content Distribution for Entertainment (OTT) End-to-end secure solutions to safety distribute video premium content Endorsed by all Hollywood movie studios Great local support and compelling roadmap More than 100 deployments to date Addressing new security challenges 5

6 Inside Secure / Internet of Things: Demonstrated its Capability to leverage long term Relationship to tackle new Opportunities Strong history on securing communications, from servers to CPU-and-memory-constrained environments FIPS-certified cryptography (the U.S. government computer security standard) Enlarging partnership towards indirect sales to other Consumer Electronics Manufacturers Silicon IP & Secure Protocols Secure Protocols Secure Protocols 6

7 Inside Secure / Connected Cars: Providing Core Technologies to Secure Cars with Great Potential Ahead Multiple design wins to secure intelligent and connected car Increasingly seen as a critical technology provider and moving to direct relationship with car manufacturer Opportunity to increase footprint in automotive market Short term Long term Video protection + Pay-at-the-pump solution Today Enable sensor chip to authenticate (Root of Trust) + Secure connection from sensor to the cloud (for map download) Encryption to secure communication between car components Silicon IP & Secure Protocols Silicon IP & Secure Protocols Code Protection Content Protection Silicon IP 7

8 Inside Secure / Financial Institutions: Securing Mobile Banking, Over Time Enabling a leading US bank to bring increased security in mobile banking, over time 50 mobile banking apps Strong local support Increased security does not impact user experience Strong authentication Providing additional technology 2015 First set of technology to secure mobile banking (Anti-Tamper & Obfuscation)

9 Inside Secure: 2018 Business Outlook Confirmed Top line growth in 2018 more than offsetting the anticipated decline of a U.S. customer which generated an exceptionally high level of revenue from royalties in H Continuously monitoring operating expenses while investing in future growth Adjusted operating expenses in 2018 are expected to be in the lower end of the previously communicated $36 million to $37 million range Company to generate positive EBITDA in 2018 before getting back to a normative EBITDA margin greater than 20% (on a stand-alone basis) 9

10 Inside Secure: Accelerating Clear Strategy to Increase Footprint of Embedded Security INCREASE FOOTPRINT OF CORE PROPRIETARY TECHNOLOGIES MANAGE SECURITY SOLUTIONS OPERATE NEW SECURITY SERVICES COMBINING ORGANIC INITIATIVES AND ACQUISITIONS 10

11 Acquisition of Verimatrix - Key Highlights BOOST INSIDE SECURE S VALUE PROPOSITION Exclusive agreement to acquire Verimatrix, Inc. ( VMX ), announced on December 5, 2018 New business dimension to build a leading powerhouse for data and digital content protection - Lead the entertainment security market with a unique value proposition - Bring end-to-end security solutions to the IoT and Connected car markets - Deploy VMX data analytics capabilities across all Inside Secure end markets Expected to be accretive* to Inside Secure s earnings from 2019, prior to full implementation of anticipated synergies BRING OEP AS A CORNERSTONE INVESTOR A new cornerstone investor to support future development and strategy One Equity Partner ( OEP ), founded in 2001, is a middle-market private equity firm focused on industrial, healthcare, and technology sectors in North America and Europe TRANSACTION KEY FINANCIAL TERMS An all-cash transaction Consideration of approximately $143 million at closing (including an assumed estimated net cash of $18 million), and an estimated earn-out of $9 million payable in Q Closing expected in the first quarter of 2019, subject to customary signing and closing conditions (*) On an EBITDA and adjusted operating income basis, excluding purchase price accounting and restructuring charges 11

12 Market Overview: Promising Mega Trends Supporting Long-Term Growth for Security Solutions Big Data and multi-device & multi-format consumption of video content Major shift towards software & cloud-based security solutions Security breaches and piracy affecting reputation and generating revenue loss Change in content consumption habit: anytime, anywhere, on any device A unique opportunity for innovative software-based player A total of $37bn revenue is estimated to be lost to piracy in 2018 (1) (1) Source: Statista Research Global online TV and movie revenue lost through piracy,

13 Shift Towards Multi-Devices Consumption Driving Increased Security Needs in Entertainment Market OVER-THE-TOP SERVICES 2012 Storage servers OTT Any device, anytime, anywhere + BROADCASTERS & CONTENT OWNERS IPTV SERVICES OPERATORS 2002 BROADCAST OPERATORS 1950 Storage servers Satellite / Managed IP Cable Smart TV, Set-top box, etc. TV / Set-top box + - END USERS 13

14 Verimatrix: the Perfect Fit to Strengthen Scale and Reach of the Inside Secure Value Proposition In the entertainment market, Verimatrix solutions help extend and enhance the relationship between content owners and service operators Verimatrix offering Comprehensive platform addressing - multi-network, multi-format, multi-infrastructure, multi-device - rights management across broadcast, streamline and file-based applications Key advantages Highly scalable cloud / software-based platform easy to deploy and run Resilient business model: high portion of recurrent revenues through licenses Solution deeply entrenched within client BROADCASTERS & CONTENT OWNERS base Verspective Analytics Big Data Intelligence: unique data analytics platform, giving operators real-time visibility over security performance and users behavior 14 Solution trusted by Hollywood Studios and content owners globally END USERS

15 Verimatrix: a Leading Software Security Provider for Video Services Verimatrix is a software-based company providing scalable, easy to deliver and run security solutions to protect video content for comprehensive multi-network, multi-device solutions that maintain end-to-end service integrity. A global independent leader Headquartered in San Diego, California, USA 4 main offices (San Diego, Paris, Munich, Singapore), more than 300 employees A resilient business model High level of repeat revenue LTM as of September 2018 revenue*: $78.7m LTM as of September 2018 EBITDA*: $14.5m Trusted by all major content owners Ranked #1 for innovation in content protection by ABI Research * US GAAP, unaudited 15 DIVERSIFIED CUSTOMER BASE WITH VERY HIGH LOYALTY ~950 CUSTOMERS IN 113 COUNTRIES

16 Verimatrix: a Business Enabler for the Most Complex Video Security Challenges Europe s largest telco India s biggest TV operator Dominant broadband operator in Taiwan Swedish TV leader Manage all user rights across different technical formats, in multiple geographies and across devices (big screen, mobile) Replace hardware solution to modernize and improve vendor interoperability while reducing deployment cost Deploy new UHD/4K and upgrade video services across multi-devices with redundant technical infrastructure to ensure service continuity Upgrade big screen interface with Android while providing a unified experience across TV, phone and tablet. Integrating down to the chip platform. A single software security platform managing subscribers' rights for video services, whatever the network, the format, the infrastructure and the device 16

17 Verimatrix, the Opportunity to Add on Inside Secure s Offering, by Building Synergies in a Broader Marketplace New business dimension: $118.6 million of adjusted revenue* and $21.5 million of EBITDA* Entertainment Verimatrix Entertainment OTT Internet of Things & Connected Cars Financial Institutions Data Center Verspective Analytics potentially across all sectors Data Analytics Silicon IP serving the expanded Entertainment business Silicon IP Secure Protocols Code Protection Content Protection VMX reinforces the Entertainment Offering 17

18 Entertainment Security Business: Verimatrix and Inside Secure Offer a Unique Value Proposition OVER-THE-TOP SERVICES Storage servers OTT Any device, anytime, anywhere A platform answering the whole ecosystem needs (multi-network operators) A pure software player position on the fastest growing segments within the digital content protection market IPTV SERVICES OPERATORS BROADCAST OPERATORS Storage servers Satellite / Managed IP Cable Smart TV, Set-top box, etc. TV / Set-top box A unique opportunity to expand OTT services to new customers (cable, satellite, IPTV operators) New security solutions to enable customers to secure revenue from premium content IS embedded security in chip to VMX solutions to solve integration issue for set-top boxes 18

19 IoT and Connected Cars Security: The Right Combination to Bring End-to-End Solutions Inside Secure technologies & solutions Provide a complete and easy-to-use platform to implement security solutions for IoT and Connected Cars Embedded security from chip design (Silicon IP) through the entire life cycle, whatever the device (Provisioning Root of Trust) Code Protection Secured communications Offer Cloud-based data scalable platform to deploy Inside Secure s offering in IoT services through : Device integrity: hardware root of trust, enabling secure boot and software update techniques to ensure devices - and software they run - have not been compromised Verimatrix software platform Scalable platform to manage credentials / permission-based core application Cloud-based data analytics platform to secure data collection and behavioral insights dedicated to IoT solutions Communications integrity: secure certificate provisioning and device authentication to prevent from intrusion Service integrity: proactive threat monitoring tool to prevent from emerging threats or imminent attacks 19

20 Big Data and Analytics: Leveraging on VMX s Capabilities to Tackle New Growth Opportunities Across All Inside Secure s End Markets Verimatrix cloud-based integrated data analytics platform collects and unifies data in the Entertainment, enabling: Threat & attack detection and analysis Analysis of user consumption habits and audience engagement Identification of dormant subscribers risk Leveraging on Inside Secure s know-how and understanding of its end markets to further enhance and deploy Verspective data analytics Better understanding of quality of experience (QoE) and quality of service (QoS) Bringing additional growth opportunities beyond Entertainment Targeted advertising campaigns Brokerage for marketing data 20

21 Benefiting from Economies of Scale Beyond Multiple Up-selling and Cross-selling Opportunities $10m Cost synergies p.a. once fully implemented Economies of scale with development teams, suppliers, ecosystem partners and device provisioning costs General & Administrative optimization that takes full advantage of the combined scale; rationalization and streamlining of the organization 10% of combined operating expenses Full impact expected in 2020 with $4m expected in

22 Key Takeaways Creating a pure software-based security powerhouse with leading position in Entertainment Scaling to a new business dimension: $118.6 million of adjusted revenue and $21.5 million of EBITDA* Ideally positioned in growing markets driven by multi-device and multi-format video consumption, cloud-based security solutions and increased piracy Ready to capture opportunities to up-sell and cross-sell customers with software security and Big Data Analytics while benefiting from economies of scale Accelerating long term profitable growth 22

23 Scale to Accelerate Profitable Growth $150m 2021 revenue target* 25% 2021 EBITDA margin target - Upselling & cross selling opportunities - Economies of scale - G&A rationalization 23

24 A Three-Step Secured Financing Package Preserving a Sound Financial Structure $143m est. closing consideration (*) +$9m est. earn-out payable in Q (**) 1 c.$38m own cash (1) 2 $54m (2) private debt 3 c.$60m / 52m equity 30m Through bonds redeemable into new shares reserved to OEP c. 22m With preferential subscription rights to existing shareholders (*) Including $18m of assumed net cash (**) Inside Secure Management estimate 1.6x excluding synergies 1.1x Incl. expected full synergies Net Debt to EBITDA (3) leverage LTM June 30, 2018 pro forma 24

25 THANK YOU 25

26 Appendix Supplementary non-ifrs Financial Information (Adjusted Measures) Certain financial measures and performance indicators used in this presentation are presented on an adjusted basis. These indicators are not defined under IFRS; they should be considered to be supplementary information, not substitutable for any other indicators of operating and financial performance that are strictly accounting measures, such as those presented in the company's consolidated financial statements. Adjusted revenue is defined as revenue before non-recurring adjustments related to business combinations to enable comparable revenue for future fiscal years. In 2017, the combined entities would have generated a pro forma adjusted revenue of $119 million and a pro forma revenue of $116 million as Verimatrix recorded $3 million of deferred revenue as at December 31, 2016 which, in accordance with IFRS, cannot be recognized in the year following the acquisition. EBITDA is defined as adjusted operating income before depreciation, amortization and impairment expenses not related to business combinations. Adjusted operating income/(loss) is defined as operating income/(loss) before (i) non-recurring adjustments on revenue related to business combinations (ii) amortization of intangible assets related to business combinations, (iii) any potential goodwill impairment, (iv) share-based payment expense and (v) non-recurring costs associated with restructuring and business combinations and divestiture undertaken by the company. 26